Lehman, Bear Stearns Are Ripe for European Offers

Once in a generation, an opportunity arises to make a transformational acquisition at a bargain price.

One is staring Europe's banking chiefs in the face right now. The question is whether they have the courage to grab it.

The deal? Buying a Wall Street investment bank.

A lot of people might chuckle over that sentence. Most bankers would rather buy a slug-and-seaweed sandwich for lunch than take control of institutions drowning in subprime debt. Why pay billions of pounds or euros for a whole heap of trouble?

Yet the credit crunch has hit the share prices of all the banks hard, and the dollar is slumping to record lows. That means Wall Street banks cost about as much as the free toy at the bottom of a cereal packet.

Europe's big lenders have known for years that to compete on the global stage they have to take a commanding position on Wall Street. The task has defeated them, though. Either the targets weren't for sale, or they were too expensive.

Now, that has changed.

Some of the world's most successful executives have built their reputations on the ability to buy businesses at precisely the moment when no one else was interested. An example: When he was running BP Plc, John Browne took control of U.S. competitor Amoco Corp. in 1999, just as oil prices were plummeting. Rupert Murdoch has made a career out of it: In 2005, News Corp. paid just $580 million for the MySpace social-networking site when Internet stocks were out of vogue. He has said it's worth $16 billion.

Based on financials alone, the price tag isn't "that" high. The danger will be that customers and superstar employees may leave the merged company. The Fed and the regulatory authorities may get spooked by increased foreign ownership of US banks and put the kabosh on a deal, especially if the larger banks are involved.

Based on financials alone, the price tag isn't "that" high. The danger will be that customers and superstar employees may leave the merged company. The Fed and the regulatory authorities may get spooked by increased foreign ownership of US banks and put the kabosh on a deal, especially if the larger banks are involved.